Personal Finance: Retirement role models
One of the biggest fears of growing old—aside from the thought of one's own mortality—is not being able to afford retirement. In fact, 2 in 5 Americans say they're seriously worried about outliving their money. And only 1 in 4 reports being very confident about having enough to live comfortably in retirement.
Shy of, say, winning the Pick Six Lotto, how do you overcome this type of fear?
One thing households can do is take a page from older workers who've successfully saved for their golden years. A new study released last week by Lincoln Financial Group, the insurance and wealth management firm, did just that. Lincoln Financial surveyed Americans in their 60s who've amassed financial assets (not including their homes) of $350,000 or more.
So what's the secret? In a word: planning. Fifty-five percent of so-called Successful 60s created a comprehensive retirement savings plan to ensure that they could afford a comfortable retirement. A majority also established long-term savings goals early on that made it easier to build up their nest eggs.
By comparison, only 42 percent of younger workers have even tried to calculate how much money they'll need to save for retirement, according to the Employee Benefit Research Institute.
Yet taking this first step—calculating how much you'll need later in life—is the best way to start a comprehensive retirement plan. Indeed, a majority of those who've taken this step reported saving more for retirement as a result. Others used this simple planning tool to motivate them to pay down their debts and invest their nest eggs more effectively.
What else can we learn from those who've successfully navigated the retirement challenge?
- Don't underestimate your needs in retirement. Successful 60s say it's important not to shortchange your retirement income requirements. Yet that's exactly what many of us are doing. According to EBRI, the vast majority of workers assume they'll need 70 percent or less of their preretirement income to fund their retirement. Yet in reality, a majority of those who've already retired say they require 95 percent or more of their preretirement income just to pay the bills.
- Don't bank on being able to work longer to make up any savings shortfalls. While a majority of workers say they plan to work until they're 65 or older, the fact is that the vast majority of people leave the workforce (either voluntarily or through layoffs or health problems) well before they hit 65. In fact, nearly a quarter are out of the workforce before they hit 60.
- Work as a team. If you don't seek professional advice, at least rely on your partner. More than 4 in 5 successful 60-somethings say they relied on their spouses to help them in planning for the future.